Panama politicians, politics, promises, electoral promises, needs, community, communities, identify, coach, coaching

Promises Panama needs

Last week I published a post regarding my “wish list” for Panamanian politicians – what I wanted them to demonstrate in their character – compassion, creativity & courage.

André Conte responded that while he enjoyed it, more than “what do you want” he wanted the question to address “what do we all need?”

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So, while I’m not entirely sure that I have managed to truly answer his question, here is my attempt at responding to the issues that I think our 2019 elected politicians need to seriously address.

Many of these issues will not fall upon the legislators to respond – but rather upon the President, Cabinet, individual Ministers and heads of Government Departments.

Some will require incredible courage, such as the head of the Caja de Seguro Social – a crisis which I have been hearing about the past 25 years. And yet, it’s still in crisis! The leadership required here is one of an appointee – not an elected official!

And yet, here’s hoping that they step forward with compassion – the ability to connect to all the interested parties; creativity – to be able to draw upon all the solutions from all interested parties to solve the crisis; and courage – to confront the many interests that arise and actually implement a solution after having heard all interests, identified the needs of the institution and the public, and work to a long-term solution for the institution once and for all.  I maintain my opinion that every single politician and director or Minister needs coaching & mentoring in order to truly be effective in their roles with adequate support!

What I’ve seen of politicians so far

Unfortunately, my opinion of politicians is not very favourable.

It’s my belief that they are driven by their need for “job security” – which means that they are looking solely for reelection (to the same post or a “better” one), rather than driven by the needs of their communities.

Typically, this means that they are always looking for a building or project with their name on it – it’s irrelevant whether the community really needed it or not. They want something that they can point to and say “look what I did for you”.  Most constituents will look at that and think “wow, they built something”, without actually asking whether that was the priority of the community.

Bureaucrats, similarly, are driven by promotion & job security. This means that they will not do anything risky – even if change is needed – because that could get you fired. Likewise, in a situation of cronyism, they are unlikely to oppose elected politicians, because that will get you fired.  This means that they will simply toe the line – even if the line isn’t going anywhere!

Community interests & needs

Unfortunately, this typically means that neither the elected politicians nor the bureaucrats are studying the interests of the communities that they serve. And moreover, it means that no one is thinking or evaluating the long-term needs of the community or society as a whole.

For some areas of Panama’s political plans, I am aware that there have been agreements reached between political parties & bureaucrats regarding long-term plans. But this is the exception, rather than the rule.  Unless politicians are willing to give up their aspirations for reelection – focusing instead on the long-term needs of society, instead of a building with their name on it or hams for Christmas – what will be done?

How will projects actually be completed if there is not complete “buy-in” from all interested parties? Solutions that are reached by the different interest groups – and not simply decided by politicians with a 5-year plan.  This is one of the primary reasons why I will harp on, over and over, about the need for compassion (connection), creativity (the ability to brainstorm with all interested parties solutions – outside the box), and courage (motivation to move forward and overcome obstacles that arise along the way) for the leaders in driving a solution forward!

Because – if for once – someone were able to get all of the interest parties to agree upon the solution, which takes longer than 5 years to implement – it wouldn’t matter that the government changes.  The interest groups themselves would keep the projects and solutions on track through the change of government. But I haven’t seen a government yet capable of pulling off a solution of this magnitude!

So, what do I think we need?

Where do I start?  Which of all of the needs of Panama is clamouring the most for attention?  If we solved one of the problems, would that solve all the rest?  I know that O’Neill in Alcoa found a keystone problem, which when he solved then solved by itself all the rest of the problems within the company, but I am really hesitant to take a guess which one of the areas of government might have the biggest impact on all the rest of the areas!

Presidency

For want of a better place to start, I will start at the top!  And I will admit – this being PanUtopia – the size of the issues to be addressed overwhelms me as to who the right person for this job might be.  Because, in utopia… this person would be capable of handling a Cabinet of Ministers and keeping each one of them, and their respective subordinates, focused on the goals at hand and putting each of the areas I will touch upon in order!

Qualities I want in a President:

  1. compassionate – able to connect with empathy and understanding with communities and their leaders; able to connect with each member of the Cabinet and empower them to effectively do their jobs, because it’s not the President’s job to fix each of the problems that I will identify below; diplomatic – able to command a room and speak from the heart, capturing the attention and connecting with the audience;
  2. creative – able to sit down at a table with 15 people + assistants, and brainstorm solutions – calling in all the talents & abilities of those present – to create solutions that no one person individually could possibly come up with; analytical & logical – able to look through the numbers and lists and come up with priorities and rationally decide the most efficient course of action; well-read & educated – to learn from the experiences and draw from the experience of others that are not even in the room through extrapolation;
  3. courageous – secure enough in their identity to speak their truth and present their ideas and solutions; motivated to see the solution through any obstacles, knowing from the very beginning that obstacles would arise and that they would need to create solutions for those, and being willing to do the hard work consistently to see it through to completion.  Motivated to push through the days when things appear to be going wrong, not simply waiting until “things feel right”.

Looking at that list… it’s kind of what I want in every Minister & Director of Government Agencies as well!  It’s not enough that it only be at the level of the President!

As you will see from the issues below – many of these issues are actually in the hands of bureaucrats – Ministers appointed by the President (not publicly elected officials) and heads of Departments.  While there will be necessary work with publicly elected officials (mayors, representatives and legislators), the majority of “decision making” and implementation will be effectively be within the executive branch of government!

How important is it, over the next 5 years, to legislate in theses matters (other than budget constraints) versus implementation of the decision-making?

Education

Unfortunately, earlier this year I wrote about the challenges facing Panama’s education system, and many of those challenges are still unattended.  Of the 1300+ schools without walls (just the roof held up on posts), there are more than 700 still outstanding. In a recent study of the 3rd grade education level, 1/3 can’t write, 50% can’t read and 60% don’t have requisite basic math skills expected!  That’s without even addressing the issues of modernisation of the system to meet the constantly changing global climate and advances in technology and work environments!

The biggest challenge, however, that I see — what is the vision that guides Panama’s education policies? How will the Minister of Education reach consensus with the educators and other interested parties (including even future employers and entrepreneurship opportunities) to establish the road map that will guide decision making in coming years?  What is the first and primary issue that should be dealt with in the education system that would work towards solving the myriad of issues that need to be faced: preparation of the teachers, infrastructure, participation in growth of the economy, technology?

This one area alone requires someone at its head that truly can get to the bottom of the issues within the Ministry and set a plan of action with the buy-in of the teachers & educators to achieve at least one phase of the plan by 2024!

Health

While I accept that the health issues are actually 2 separate issues, one being the Ministry of Health (and approval of imports of medication, as well as the State health network), there is the more pressing crisis of the CSS (Social Security).  This is a challenge from within as well as from the outside!  The competing interests are tearing it apart, as they have been doing for the past 30+ years!

There are issues regarding their finances & assets, issues with respect to the services (or failure) offered, the infighting and power struggles (national as well as regional and within hospitals), and the competing interests of the doctors, nurses, technicians, suppliers & patients.

This is definitely a scenario where I could see the identification of keystone habit (such as that described by O’Neill in his experience at Alcoa) would actually make a monumental difference to the whole organisation and could be the beginning of a solution!  However, O’Neill was lucky that he counted with the support of his Board – the ones responsible for bringing him on to solve the problem!  In the case of the CSS – this need for support from the Board would need to be addressed!

Housing

Panama currently faces the challenge of needing 200,000+ housing units – but the construction industry is faced with rising labour & material costs.  Construction permits dropped 50% in 2018, and while the country needs 15-16,000 additional homes each year, only some 14-15,000 a year were being built (before the drop in permits!).  Of the 100,000 homes promised by the current government during their term, some 45,000 have been built.

The head of housing will need to balance the interests & needs of the community (for housing) against those of the construction companies, infrastructure needs, and environmental concerns.

Infrastructure

Closely related to the need for housing are other infrastructure needs – even though in 2018-2019 some $2 billion of projects are underway.  This includes finishing line 2 of the Metro and starting line 3 to Arraijan & Chorrera.  But one of the questions being regularly asked is why Chorrera is merely a satellite of Panama City, rather than being designed and built as a separate center that provides employment and not merely sleeping quarters to workers for Panama City!

Two thousand km of roads were promised by the government and claimed to have been built, although it was later clarified that this was really only some 355 km that were completed.

The government also promised to eradicate latrines – but while 200,000 were promised, the results remain unknown.  Likewise, running water has not been installed to all communities in Panama, and many communities still find themselves off the electric grid and mobile phone coverage.

Energy

Closely related to the foregoing issues are the myriad of issues tied up in the energy sector.  I wrote about these issues a number of months ago.  The interest groups here are varied and with conflicting interests.  Needs include:

  • a long-term maintenance plan
  • transmission line #4
  • pricing
  • environmental policies and policing.

The sectors that are affected by energy include: construction, commerce, industry & consumers.

If Panama wants 75% renewable energy by 2050, it needs to change the legal framework and confront the investments recently made into gas-based energy projects, rather than green energy projects such as wind farms or solar power.  In 2016, 60% of the electricity produced in Panama was through hydroelectric plants (which while a renewable source, create significant environmental damage in large areas), 32% thermal, 7% wind and only 1% solar.  What is curious to note is that worldwide, countries with much less sunshine (take for example – Germany) have a much higher rate of solar power than our tropical nation!  Go figure!

Fiscal Policy

Panama’s current fiscal policy requires an overhaul – in order to:

  1. attract investment
  2. be fair on all the players in the market (including small & medium enterprises)
  3. tax monies should not be “lost” through poor management and corruption/theft
  4. in order to “balance the books” – decisions may need to be made to cut government overhead
  5. it may be necessary to down-size government offices, irrespective of how unpopular that may make government members!

Economy

Where to start?

Panama currently faces more unemployment, less investment, less loans being granted and less sales in commerce.  In 2018, the unemployment rate increased for the fifth consecutive year.

There is a serious lack of equality within the country, with many areas still in subsistence farming and well below the poverty line.  Only a few sectors are actually benefited by the current economic growth that is touted internationally.

Financing is barely available for the business sector, particularly small to medium enterprises.  Policies do not support or encourage growth, investment or expansion of companies.

Unemployment

Forty percent of the workforce is currently listed as “self-employed”, “on contract” or “part time” – with no stability.  The results in lower productivity and inability to participate in bank financing and other needs.

Special Zones

While the special zones were thriving, with global changes, they are failing to create a significant difference to the economy and generate employment. Policy changes and focus are necessary.

Tourism

While tourism generates about 10% of GDP and 130,000 jobs in the economy, hotels are currently suffering with a 46% occupancy rate. Once again, a concerted plan and creativity – from public and private sector together – is required to change the situation.

Agriculture

It would appear that the agricultural sector has been abandoned to subsistence farming – with not much technological or educational assistance to the sector.  Exceptions to this are the farms owned and operated by the major supermarkets, who basically produce exclusively for their own consumption.  But many areas of the country are abandoned, with little or no interest in exchanges of technology between countries and participation in projects for learning in the alienated communities that are relegated to subsistence.

Another concern, in the commercial enterprises of farming, is long-term sustainability and environmental accountability for farming methods – particularly long-term effects of runoff from the farms and damage to the surrounding environment.

Justice & Security

I can’t close without mentioning the concerns about the justice system and security issues in Panama.  There are many jokes and memes about “perception” – we “perceive” that there is a problem.  But let’s get real – there is a problem! Not a perception!

Security of citizens and tourists needs to be addressed not only in Panama City or Colon, but in the entire country. Gangs & drug trafficking need to be addressed, as do home invasions and robberies.

In the justice system, attention should be given to the Sistema Penal Accusatorio – which was introduced over the past few years.  It’s not that the system should be reverted to the previous system, which was full of its own flaws – but attention needs to be given to the concerns of the police force and prosecutors regarding their experience within the system. These concerns needs to be addressed across the board.

  • What needs to be fixed?
  • What simply needs to be tweaked?
  • How can members of the police force be educated and prepared better to work within the system?
  • Where are different parties frustrated by the process?

Change is never comfortable, but concerns should also be addressed.

Drawing this to a close

As I look at all of these needs, I recognise that Panama needs well-prepared teams within each area.  This is not an issue for “the President” to fix. I admit, I am sick of people saying “The President needs to come here and solve this problem”.  A country’s problems cannot depend solely on one person to solve them!

This is something that will require not just Ministers that are prepared to sit down at tables, but all interest groups that are well-versed in the myriad of issues and concerns of their specific industry and that are open to brain-storming solutions that take into account all of the interests in the matter, rather than simply being closed to “this is my position”.

Experienced negotiators and mediators – that are able to delve into the needs and interests of all parties will be required at each table – that can identify the need that lies below the stated position.  People that know how to ask questions and are willing to continue asking until truly connecting with the source of the interest, rather than accepting on face value a projected position at the negotiating table.

If any one of these problems is truly to be addressed and a solution found – all parties have to be prepared to see all sides of the issue and begin to accept that the solution may only truly be found by everyone working together to build a better country!

Communities themselves will need to start to believe that they possibly have a role to play in solving the problem, and actually in carrying the solution into effect.

This may require that everyone stops looking at their belly button and “what’s in it for me?” – and actually starts to look at

“how do we all participate in fixing these problems?”

Well, as always, this is PanUtopia!

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Panama, business, money, entrepreneur, business index, economy, doing business, starting a business, economic indicators, ideal business environment, import, export, fintech, incubators, assistance

Panama’s money stories – the way forward

Ranking and Index: doing business in Panama

One of the difficulties that I see on the way forward, is that Panama is not the easiest country in which to set up a business (locally) and run it.

Panama scores a low #54 in “economic freedom” according to the Heritage.org, having a score of 67.0 – because of drops in property rights and government integrity (corruption).  On the other hand, the Fraser Institute and the Economic Freedom Network place Panama for 2017 at #30 in Economic Freedom.  Forbes lists Panama as #64 in “Best Countries for Business“.  Unfortunately, economic growth has depended on debt-financed infrastructure projects, while the economy has depended heavily on transportation and logistics services.

One of the biggest problems with all the infrastructure development and spending is the burden this creates on tax payers.  General government gross debt accounted for 39% of GDP in 2017, with a fiscal deficit of 3.1% (up substantially from 2% in 2016). That said, amazingly enough the IMF estimates Panama will have the highest per capita GDP in Latin America – USD 25.712 – in 2018.

That said, Panama continues to have the fastest growing economy in the region: our well-developed services sector accounts for over 75% of GDP.   Before the crash of 2008, Panama has the highest growth rate in Latin America (close to 11%) – with real estate prices and speculation leading the rush.  Since 2013, the GDP has slowed from previous levels of 6-8%, and following on from the #PanamaPapers scandal the banking and corporate services sectors have diminished considerably.  The services which continue to contribute to GDP include logistics, banking, the Colon Free Zone, insurance, container ports, tourism and offshore services to a lesser extent.

Unfortunately, Panama dropped (2016-2017) on the global entrepreneurship index from 32.2 to 26.1, and in the innovation index ranks also #63.  In human development, Panama also ranks similarly at #61.  Likewise, in the knowledge economy index, we come in at #64.

Having looked at these indexes, it is interesting to see how well Panama is moving with respect to FinTech, blockchain and the implementation of these technologies. As Panama seeks to leave behind the shroud of “shady deals” and “Panama Papers”, the Ministry of Economy & Finance has announced an initiative to regulate FinTech, blockchain, sandboxes, crypto-currencies, and crowd-funding enterprises.

Development of the Fintech industry in Panama

Bitcoin, blockchain, fintech, crypto, currency, FinTech, disruption, innovationUnbeknownst to most people, Panama is on the list of countries that are friendliest to Bitcoin and crypto worldwide!

Panafintech is the Panamanian Association of Fintech, who so far have organised five blockchain and fintech events.  Back in 2017 they organised an event for 300 people from banking and finance, to discuss blockchain – its scope and application.  It was at this event back in 2017 that Cryptobuyer announced that it was moving to the City of Knowledge and that it would be developing Blockchain Academy Latam.

Blockchain Academy offers training not only to developers and entrepreneurs, but also for financial institutions (such as banks), organizations, schools and the government.  It also offers a bootcamp in which it is possible to learn about cryptocurrencies, industry, mining, Blockchain, opening a digital wallet and other applications of the technology.

blockchain-3212312_1280Cryptobuyer is unique in Panama, offering the “Blockchain Academy Panama“, in which it offers training and certification in programming with blockchain, and has its offices in Ciudad del Saber.  Additionally, it has installed Bitcoin ATMS in parts of Panama, such as in Banistmo (since June 2017) and has installed Cryptobuyer Pay in various local businesses (so that they can accept payments in Bitcoin and other currencies).

Cryptobuyer also set up Blockchain Embassy Panama, which opened in 2017.  In addition to offering crypto clothing and merchandise, craft beers, hardware wallets and working space, the embassy also gives cryptocurrency workshops and presentations.

The first large-scale conference on fintech & blockchain was held May 5 & 6th, at Ciudad del Saber, and called “PanamChain“, with Andreas Antonopoulos  as the Keynote Speaker (author – Mastering Bitcoin (O’Reilly Media), speaker, educator) .  This event was organised by Cryptobuyer and Panafintech.

Coming up on May 24th, Panama will host its secondDigital Business Day“, offered by CAPAtec – the Panamanian Chamber of IT, Innovation & Telecommunications.  This is a “Microsoft Experience Day” – about AI, transforming customer experiences, using ChatBots, and “intelligent billing”.

Disruption & change of the market

Fintech additionally has a role to play in Panama’s “offshore industry”. At its simplest, financial technology – or fintech – applies technological innovations to financial processes, products and services. It could easily play a large role in the lucrative business of identity verification, eKYC and fraud detection. This could also directly impact in the banking industry, if Panamanian banks could work out how to incorporate this into their account opening process.

blockchain-3019120_1280Experts in blockchain have shown that banks could easily change their account opening process to a simple 5-step process relying on this system.  Some go so far as to claim blockchain technology could transform international financial transactions in much the way the Internet transformed communications. Of course, on some levels fintech competes with the traditional financial methods of delivering financial services.

Blockchain = distributed ledger technology  – provides decentralized networks that simply record transactions.  So, for example, IBM provides “Blockchain-as-a-service” for banks.  It is interesting to see how the blockchain industry could have helped Panama avoid the #PanamaPapers, as expressed by Otonomos BCC:

Our hope is that a decentralised database, which by its very nature is secure, tamperproof by third-parties and immutable even by its very authors, can be looked at by enlightened regulators around the world. This technological architecture could ultimately become a global, cross-jurisdictional database.
At Otonomos, which represents private company shares on blockchain and makes them programmable, we have engineered a decentralised solution that performs Know-Your-Customer checks at every stage of the ownership chain of company shares, and watermarks the shares with the UBO’s identity.
In addition, Otonomos has architectured our solution with the privacy of end-users in mind. We make public only such information regulators in a specific jurisdiction require to be publicly accessible, whilst masking non-publicly disclosed information.
Finally, we future-proofed our solution by letting third-party verification agents — typically organisations such as banks who by legal mandate from their Government can perform KYC checks -“stamp” people’s KYC at the blockchain level, resulting in a layered verification process in which every check fortifies a user’s KYC.

Nonetheless, it seems that tech giants are much further ahead in disrupting banks, as these lag behind in cloud computing, AI and big data.  Fintechs define the direction of innovation in financial services, but they face a challenge in their ability to scale (something that companies like Amazon or Facebook have already dealt with).  So, for example, Amazon Web Services provides cloud computing for Capital One and Nasdaq.  That’s because of the scope of the transactions that occur on a single day, which small start up fintech companies are not ready to handle.

If what we see internationally occurs in Panama, this means that large banks are acquiring fintech companies and digital banks, as strategic acquisitions – they are simply leveraging the competition to re-establish their leadership in the market.  So, for example, in Panama we have a small crypto-currency that was recently established:  Natan Edu – created by a group of young entrepreneurs, as a payment system in education, to allow payments of online courses.  This was created by Osmar Major and Marcos Pineda (22 and 24 years old respectively).  Will this be swallowed up by bigger players in the market?  Additionally, just this week, DigitalX (the first crypto-currency fund established in Australia) indicated that it is looking at Panama to establish the Latin American financial hub.

Response from the banking sector

Panama’s banking sector, however, has been very cautious in response to fintech, indicating that until it is fully regulated, they simply see the possibilities of further scandals for money laundering.  On this note, Panama’s banking Superintendence issued a notice to banks that the activity of exchange, investment, purchasing, and commercialization of “Bitcoin” or any other crypto-currency is unregulated in Panama.

As a result, some traders were threatened with having their bank accounts closed at local banks for receiving funds from their international crypto accounts!  This seems to be completely contrary to the way it is being dealt with, for example, in the US where Goldman Sachs and Morgan Stanley both announced that they were going to get involved in crypto-currencies.

Nonetheless, we find that Australia (leading with DigitalX), the UK and other jurisdictions have all introduced regulations in order to create the market conditions for development of fintech, blockchain and financial services.  For example, back in 2015-2016 the UK introduced their regulatory framework, working closely with the operators, so that fintech firms could set up.  This involved the Innovation hub (similar to what Panama wishes to do in the City of Knowledge), in which the businesses can understand the financial regulations and how these might apply to their business model.

As with the Innovation Hub in the UK, the City of Knowledge will simply provide guidelines, from which the startup would need to apply for the regulatory approval from the respective agency (possibly the Banking Superintendence or the Securities Commission).  Also copied from the UK is the idea of the “sand box” – where fintech startups can test their financial products and their business model in the market, and then work out the details of regulation as the market develops.

So, as Panama looks to regulate “Specialized Financial Entities”, as it is calling fintech companies, setting up crowd-funding enterprises, incubators and sand boxes, I hope that it doesn’t simply protect the interests of the existing players (like banks), but rather innovates to draw into the country investors, know-how, and entrepreneurs that are looking to build something special from Panama.